Blog - Cambridge Chamber of Commerce

Just a few short weeks ago it literally was business usual for everyone.

 

But as the scope of the COVID-19 crisis began to unveil itself all businesses, both big and small, were immediately faced with making some very tough decisions.

 

“When we initially heard everything what was happening with COVID-19  we decided to adjust to the situation and maintain a very safe environment,” says Christine Grant, co-owner of Modo Yoga Cambridge, noting reducing class sizes at their Ainslie Street North studio and introducing even stricter cleaning protocols were the first steps.  “But as the situation developed and we realized we had to close our doors it was incredibly emotional. You almost feel like you’re failing the community when you say, ‘we have to close our doors’.”

 

Mike Hruden, general manager and co-founder of Four Fathers Brewing Company said the moment the province first announced the closure of non-essential services it resulted in near panic.

 

“We had a very crazy day in retail because people thought everything was closing,” he says, adding that concern subsided once a revised short list of closures was announced.

 

But like all business owners they quickly realized they would have to switch gears to operate in this unprecedented economic reality.

 

“You can try to be a trendsetter but you don’t know what’s right or wrong, or what you can or can’t do, so we really paid attention to what the government has been posting,” says Mike, referring to the steps his business has taken.

 

Sadly, he says Four Fathers Brewing had to layoff its kitchen and taproom staff but continues to offer free local delivery and curbside pickup at its Guelph Avenue location. Takeout, delivery and curbside pickup are steps many local restaurants and eateries have now undertaken as the crisis continues.

 

“The first thing which has taken off and seems to be appreciated by the local community is free local delivery,” says Mike, noting it began as a March promotion but has been extended.

 

Although most of Four Fathers’ orders are coming from Cambridge, he’s also seen orders come in from Kitchener, Waterloo and Guelph.  He says they are looking at extending the service to Fergus and Elora.

 

“It’s just something that allows people to stay inside and when we deliver, we put the box at the door and stand back and greet them,” says Mike, adding  similar safety protocols are in place with their curbside pickup which has jumped to at least 70 orders last week alone compared to the five or six they saw a month.

 

“There’s a lot of change happening right now, so you have to take it day by day,” he says.

 

Christine and her business partner, Emily Drouillard, agree and say thinking outside the box and being open to any ideas to assist customers is key.

 

“So many businesses have already made that shift,” says Christine, referring to online services now being offered by numerous local businesses, including food and supply pickups and fitness classes. “Don’t think about ‘what I’m not able to do in this situation’, but ‘what can I still do?’.”

 

She says business owners must realize that offering the same service as they did before is nearly impossible.

 

“You just have to do the best you can right now. You can sit and sulk, or you can get up and figure out how to move forward,” says Christine.

 

In their case they were fortunate the Modo Yoga community, which includes more than 70 studios worldwide, was able in just a few days time launch an online network offering numerous classes from around the world.

 

“It was pretty amazing,” says Emily, who says the Modo Yoga community initially had plans to launch this network in the fall but quickly decided to step up the process when the pandemic struck. “Four days going into this there were no videos but the whole community rallied together to send off videos and make content available, so now there’s hundreds of videos and it’s updated daily.”

 

As well, Modo Yoga Cambridge offers two live classes daily on its Instagram account, which are saved for future viewing to ensure followers can practice with their favourite instructors on their own schedules.

 

“It’s been a big learning curve for us,” admits Christine, explaining instructors themselves are learning to adjust conducting virtual classes. “But the response has been great and the support from the community has been wonderful.”

 

Emily agrees and says community support is vital to getting through this crisis.

“What we’re seeing is how responsive our community has been to this shift,” she says, adding very few businesses were prepared for something like this. “Nobody really has a choice in the matter.”

 

But businesses themselves are also doing their part to support the community, including adapting their services to help the healthcare industry.

 

At Four Fathers, Mike says they’ve created a batch of beer which is being sold over the next few months to benefit the Cambridge Memorial Hospital in its fight against COVID-19. He’s hoping to raise at least $4,000 through this fundraiser towards the purchase of needed medical supplies, including masks.

 

“We’ll give them a donation and they can buy whatever it is they want from their donation list,” he says.

 

For local realtor Scott Bennett, who works at the ReMax Real Estate Centre on Hespeler Road, giving back to the community has resulted in a growing movement. Since late January, when COVID-19 was only a threat to Canada, he began a campaign of creating and delivering emergency hygiene packs to those in need, including seniors and those with pre-existing medical conditions.

 

To date, and with the support of the Cambridge Rotary Club, ReMax and volunteers, his campaign has resulted in the delivery of at least 400 kits each containing hand sanitizer, antibacterial hand soap, non-latex gloves and disinfectant wipes.

 

“There’s been such a big response from the community,” says Scott, who receives messages on Facebook regarding residents who need kits.

 

“I’ve been doing quite a bit of running around. A lot of the products are hard to find now,” he says. “I’ve had some store managers who call me when they get in a new shipment.”

 

The kits are packed at Fiddlesticks Community Centre where Scott is now including homemade disinfectant wipes created by liquid Lysol soaked in cloth purchased online in bulk.

 

“We drop off the kits on the porch and there’s no contact. I’m really surprised by the demand and the need,” says Scott, adding his real estate work hasn’t slowed down. “I’ve actually been pretty busy with that lately. I thought a pandemic would slow things down.”

 

He says conducting even more virtual tours has become the norm and that great care and the necessary precautions are being taken when showing clients’ a home.

“It’s not the ideal situation but a lot people have to move because they’re closing on other houses,” says Scott.

 

It’s expected our current situation may not change for several months, but in the meantime, staying connected and healthy is important.

 

“We feel now more than ever it’s important people keep moving their bodies and connecting with friends,” says Emily.

 

 

 

 

 

 

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I am a small business owner based in Cambridge, Ontario.  Along with my partners, we operate two manufacturing operations employing a total of about 25 people.

 

I am proud of all of the response of our political leaders to this crisis on all levels – local, provincial and federal.  They have taken a sober and analytical approach to the immediate needs of the citizens of this country.

 

Their willingness to commit funds, resources and support to our front line workers, small businesses and all in need will get Canada through this ordeal.

 

As a business owner, my top priority is always looking ahead to determine how I can not only succeed; but avoid unexpected disruption to my team; and minimize our potential for risk of any kind.

 

This is where I think the business community needs more support from our leaders.

 

The question of when we should re-open for business is open for debate.  The leaders in Canada, USA and abroad have differing opinions on this matter. 

 

There is only one question on my mind – what is required for me to do business in a way that will be safe for my team, clients and supply chain?  This is the question that must be answered prior to our return to regular business.

 

There is no doubt in my mind that the scientists of the world will determine when it should happen; using the tools and expertise available to them.  It brings me comfort to know that our Canadian politicians are being guided by science in their decision making process on these issues.  

 

However, there is another component to this decision that I think we are neglecting.  Whenever we return to work, it will be to a new business landscape.  There are new risks, new considerations and a higher expectation from the community for business owners to provide a safe working environment.  As a community, we need to determine what will be required to have in place prior to a return to “regular” business. Until we have a vaccine / “herd immunity”, do workers require masks to be safe?  Do we need to require hand sanitizer at entry points to work areas and require all team members to use?  In Taiwan, there are some common practise expectations for citizens that have allowed them to maintain a very low infection level of COVID without restriction on children being at school, or businesses operating normally.  What can we learn from their example that can help us to prepare to resume our work?

 

If Toyota, Honda, or even my business or a local hair salon re-opened in two or four weeks without making any adaptations to how the risk of COVID transmission is controlled; how will we have made progress against this disease?

 

The saying “time heals all wounds” has never resonated with me.  Time doesn’t heal all wounds; but time does offer us the opportunity to prepare for what is coming at  us next.  We know that the economy will have to resume prior to COVID being completely eradicated.  The question is – what will we as a community do to mitigate the risk of another peak of infection as we make that return to the new normal?

 

There is no question that children will have to return to school; I am less concerned about when that happens than I am about what the plan is to keep them safe and healthy once they are there.  We have the example of how Taiwan has made this work; kids wearing masks and having plastic cubicle style dividers between desks during meals.  Will we use this time to learn from their example and adapt our own action plan for what is required to be in place prior to resuming their in class education?  My hope is that we do. 

 

The Cambridge Chamber of Commerce is starting to gather experts and business owners to start this discussion.  I am proud to be a part of this discussion; I look forward to learning and planning together with others to determine how we as a business community can plan to get back to business.  This is new territory for everyone – consumers, business owners, employees, politicians, government, youth and seniors.  If we can agree on the supports that are needed to re-open in a safe manner, the time spent until that happens can be spent planning and making the required changes to how we do business to accommodate the new reality we live in.  If as a community we neglect this opportunity to plan and adapt, we are destined to repeat this cycle of the pandemic again in the not so distant future.

 

This is work that our Chambers of Commerce, professional associations, industry associations, regulatory bodies or governing standard registrars, perhaps the labour unions and school boards are well poised to do.  They have connections to business in their sector, a communication channel with a broad range of companies in a vertical market, and the support of their members.  If we all pressure these organizations in our own industries to get to work on our behalf, we can start planning for the future.

 

It’s time to change the question from “when can we re-open” to “what is required for a safe and healthy re-opening in my workplace to get through this crisis”?

 

Let’s get to work.

 

Kristen Danson

Managing Partner

MitoGraphics Inc. / Swift Components Corp

519 240-4205 Direct

 

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Self-isolation. Social distancing.

 

These are terms that have now become part of our daily life in the wake of the COVID-19 crisis, which is causing anxiety worldwide both socially and economically.

 

But ensuring we maintain good mental health amidst this trying time is vital, says Angela Englander, a registered psychotherapist and trauma specialist who operates Ways to Wellbeing Therapy in Cambridge and Tillsonburg.

 

“We need to be reaching out to each other now more than ever,” she says. “We really need to be connecting with our community.”

 

Angela, who specializes in the treatment of all of types trauma, including PTSD (post-traumatic stress disorder), says what we’re dealing with is very similar to what the world experienced during the First and Second World Wars.

 

“We’re getting isolated and starting to get scared of each other,” she says, adding that in the years following the COVID-19 crisis we may be faced with a large number of people dealing with PTSD and a variety of mental health issues. “Many people appear to be having an acute traumatic stress response right now in that they're hypervigilant and full of adrenaline and flooded emotionally.”

 

Angela says nightmares and trouble sleeping are just a few of the common reactions to trauma people may be experiencing.  She has, however, noticed that some of her clients who are dealing with PTSD seem less concerned since many already often live in self-isolation.

 

“They’re saying, ‘the rest of the world is living like us now, and that’s kind of validating’,” she says, adding there are others who fear society will break down as a whole.

 

“People are concerned about becoming ill, experiencing pain, suffering, starving and having their neighbours and people around them turn on them, with riots in the streets.”

 

Angela says the long-term effects of PTSD could include headaches, flashbacks and mood swings.

 

“I think there will be a lot of mental health fallout but I hope the government will step up to fund psychotherapy so people can heal,” she says.

 

Currently, OHIP does not cover the cost of psychotherapy.

 

To combat these fears and anxieties surrounding COVID-19, Angela recommends not only reaching out to a professional for coping strategies and support but by creating a daily routine of self-care.

 

“Maintain routine and focus on your accomplishments,” she says. “Stay connected to others through social media or Skype or by phone.”

 

She says deep breathing, stretching and yoga are also good methods to boost good mental health.

 

“And now that we may not be distracted as much by our work, we can start connecting with more of the community,” says Angela. “This could be our golden opportunity to turn things around.”

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Boom! Canada hit 4.5% growth in the second quarter after a torrid 3.7% expansion in Q1! Sounds like growth in India, not a sleepy advanced economy. As a result, Canada’s deficit is lower than expected and the government announced additional spending. So is it time to stop worrying and pop the champagne?

 

 

There are four key drivers of this bonanza: (1) export growth thanks to the oil and gas sector; (2) consumption, because Canadians continue to borrow and spend like there is no tomorrow; (3) housing which saw the biggest gains in 8 years; and (4) a healthy gain in business investment. The question is whether these are likely to continue?

 

Firstly, Canada’s exports are set to rise 8% this year, which is superb, but is almost entirely driven by oil and gas sales which are up almost 42% so far this year (see chart on the following page). If you take out the petroleum sector, Canada’s exports grew just 1%.

 

But the export boom won’t last: the strong loonie and US weakness caused Q3 exports to fall 11.5%, while imports fell 7.1%. Net exports will be a drag on GDP growth for the rest of 2017.

 

Consumption will also slow down in Q3. Retail sales fell two months in a row (July and August). And job growth slowed:  just 43K jobs were created in Q3, the weakest quarter in a year, with gains entirely in the self-employment category. Private sector employment fell for the first time since 2015.

 

Housing has been a powerful driver of growth, but the foreign buyer tax hit Canada’s largest and fastest growing real estate market in May. Toronto’s home  sales have fallen 35% while prices were off 20%. The effects are likely to be temporary, as we saw in Vancouver, but will surely be felt in Q3.
 
The star of investment spending has been the recovery in the oil and gas sector but that is also facing tough times. The National Energy Board’s expanded focus on downstream emissions has created an effective moratorium on new energy projects. TransCanada finally pulled the plug on Energy East and in the last two years, $82 billion of investment has been cancelled.

 

So, we can expect a sharp downturn in exports and housing alongside much weaker consumption and business investment. Statistics Canada will release Q3 growth on December 1st and we expect it to be below 1%. What should we do? How do we keep growing?

 

Look around the world - these are exciting times in tax policy! France has just embarked on major tax reforms, with a 2017 budget that reduces or eliminates several business taxes, while lowering overall rates. The UK Government undertook a major tax reform effort last year, but backed away from the most contentious measures in April 2017. And in the US, Congressional Republicans are determined to press ahead with a biggest tax reform in 30 years, to slash the general corporate rate from 35% to 20% while eliminating certain tax credits.

 

What is Canada doing in the midst of our trading partners' laser-like focus on competitiveness? We've just spent most of the summer in a ferocious battle over income sprinkling.

 

Instead, Canada could create an internationally competitive system of business taxation that rewards entrepreneurship, encourages businesses to invest in the technologies, skills, and capacity they need to grow, and attracts capital and highly qualified people from around the world. That would ensure Canadian growth for generations!

 
For more information, please contact:

 

Hendrik Brakel

Senior Director, Economic, Financial & Tax Policy

hbrakel@chamber.ca

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Never in the history of trade negotiations have we seen a country’s largest, most important business  association openly call its government’s trade proposals “dangerous” and say they should be withdrawn. That is exactly what the U.S. Chamber of  Commerce did yesterday.

 

Canada’s negotiators have done their very best in a challenging environment. They have reached out to Canadian people and business, they have extended a warm hand of friendship to their U.S. and Mexican counterparts and they have tabled sensible, generous proposals to improve NAFTA. But, we all have to prepare for the possibility that the U.S. will withdraw from NAFTA, based on the poisonous proposals U.S. negotiators have presented.

The craziest is a sunset clause that would terminate NAFTA after five years unless all three parties agree it should continue. Imagine the uncertainty of having all three countries debate the merits of trade every five years. How could anyone plan to build a factory with a useful life of 30 years? NAFTA would cease to exist for the purposes of long-term business investment.

 

The second troubling proposal concerns the rules of origin. Currently, 62.5% of a car or a truck must be produced in the U.S., Mexico or Canada for it to qualify for duty-free treatment under NAFTA. The U.S.’s proposal would require that 50% of the vehicle be produced in the U.S. This would be immensely harmful to the North American auto industry. It’s impossible to replace long-established multi-billion- dollar supply chains so most companies would simply pay the generally low U.S. tariffs. Manufacturers would then source more inputs from Asia.

 

The third concern is the administration’s proposal to eliminate Chapter 19, the process for dispute  settlement for anti-dumping and countervailing duties.
 
This comes at a time where the U.S. wants to impose a ludicrous 300% tariff on Bombardier jets, which is above even what Boeing had asked for. Chapter 19 is a critical safety net because it enables an independent, binational panel of five arbiters, agreed by both parties, to determine whether or not the duties have merit based on U.S. domestic laws. This is a must-have for Canada.

 

The final jaw-dropping proposal would drastically reshape NAFTA’s procurement rules. U.S. negotiators are proposing a “dollar for dollar” approach to North American procurement markets. That would mean “the total value of contracts the Canadians and Mexicans could access, together, couldn’t exceed the total value that U.S. firms could win in those two countries.” This is quite simply the worst offer ever featured in a trade agreement and is worse than basic access to government procurement offered under the WTO. Canada would be better off with no agreement at all than signing on to this nutty nonsense.

 

At the Canadian Chamber of Commerce, we salute the government’s efforts on NAFTA. The government has done everything possible: our negotiators have been outstanding, Minister Freeland and the entire Cabinet have invested enormous time in building relationships in the U.S., and the PM has invested his political capital and considerable charm to go to bat for NAFTA.

 

ut, if the U.S. administration is not serious about negotiating a mutually beneficial agreement, then we believe no deal is preferable to a bad deal. This is because a trade agreement will last many years. The Trump administration, we’re not so sure…

 

 

For more information, please contact:

Hendrik Brakel

Senior Director, Economic, Financial & Tax Policy

613.238.4000 (284) 

hbrakel@chamber.ca

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Leading tax practitioners say that business owners with income as low as $50K will be affected

 

Ottawa, September 27, 2017 – The Coalition for Small Business Tax Fairness, a unified voice of more than 70 organizations representing hundreds of thousands of business owners across the country, has written a new letter to Finance Minister Bill Morneau with professional analysis confirming that Ottawa’s tax proposals will affect middle-class business owners, resulting in higher tax rates than other Canadians with similar income levels.  

 

“We are alarmed by the huge gap between the government’s statements about the impact of their proposals and the detailed analysis by Canada’s tax professionals,” said Dan Kelly, President of the Canadian Federation of Independent Business (CFIB) and member of the Coalition. “Tax practitioners are united in the view that these changes have the potential to affect all small business taxpayers, no matter their income.”

 

"It is the farmers, mom and pop shops, and entrepreneurs, who invested everything into their businesses, that will be most affected by these changes, instead of targeting the real problem. The government needs to go back to the drawing board, hold a real consultation and listen to what tax professionals, provincial governments and the business owners who fuel the growth of our communities are saying," added Perrin Beatty, President and CEO of the Canadian Chamber of Commerce.

 

The government has claimed that these proposals would not affect business owners with incomes under $150,000. Tax practitioners disagree.

 

One of the new rules introduced by the government would restrict small business owners from sharing income with family members. Tax practitioners say that this can affect business owners with incomes as modest as $50,000. Also, as two-thirds of Canadian incorporated businesses are majority owned by men, the restrictions on sharing income with a spouse are likely to remove a disproportionately higher number of women from benefiting from their family’s business.

 

The government is also proposing changes that would discourage small business owners from holding certain types of investments in the incorporated company. According to tax practitioners, business owners retain business earnings in the corporation to safeguard against economic downturns, secure bank financing and invest in other start-up companies.

 

Tax practitioners have confirmed that the proposed tax changes would result in higher combined corporate and personal taxes for business owners across the board and in many cases, small business owners would incur tax rates far greater than what an employee with a similar level of income would pay. 

 

The Coalition, which has doubled in size since August 31, is asking the federal government to review carefully the analyses of tax professionals across the country, take these proposals off of the table, and launch meaningful consultations with the business community to address any shortcomings in tax policy.

 

The Coalition for Small Business Tax Fairness is encouraging business owners and other concerned Canadians to contact their Members of Parliament and use the hashtags #unfairtaxchanges #taxesinéquitables on social media. For the full list of Coalition members, please visit smallbiztaxfairness.ca.  

 

For media enquiries or interviews, please contact:

Andy Radia
Media Relations Specialist
647-464-2814

 

What some are saying:

 

“The agriculture equipment manufacturing sector represents 12,000 Canadians and their families predominantly in rural areas; as entrepreneurs who have put their lives on the line to invest in and grow their family business, the sector consistently exports more than $1.8 billion of farm equipment to over 150 countries. The scope and complexity of the proposed tax changes puts a lot of this at stake, and we must fight to ensure that fairness prevails for our members.” — Leah Olson, President, Agricultural Manufacturers of Canada

 

“Franchisees are the backbone of the communities they serve, by employing people of all backgrounds, supporting local initiatives, and helping grow the economy. As business owners, they assume significant risk, but have been able to achieve success through hard work and support from family members. Simply stated, CFA believes the changes being proposed by the Minister will hurt Canadian franchisees.” — Ryan J. Eickmeier, Vice President, Government Relations & Public Policy, Canadian Franchise Association

 

“The residential construction and renovation industry has always largely consisted of family-run businesses that help build the communities they operate and live in, many over several generations. These are hard-working Canadians trying to earn a middle-class living, hire local workers, and create a future for their families. The government’s proposed tax changes threaten the very existence of these businesses, posing a threat to small local companies in every community and the jobs they create.” —Kevin Lee, CEO, Canadian Home Builders’ Association

 

“We look forward to working with the Minister of Finance to ensure that any changes help secure the future of agriculture and not hinder it.” — Mark Wales, Chair of the Canadian Horticultural Council’s Business Risk Management Committee

 

“We are fully supportive of the government’s pledge to advance evidence-based policy-making. Our members are concerned that the government’s proposed changes to small business taxes are not sufficiently informed by the level of research, analysis and consultation required to ensure a full appreciation of the impacts this will have on Canadians - not just entrepreneurs and small business owners but also on the overall health of the Canadian economy and competitiveness in the short and long term.” — Leigh Harris, Vice Chair (Interim) National Board of Directors, CMC-Canada

 

“Canadian business families are scared, confused, and demoralized. Years of planning for business succession will potentially go up in smoke! And we’re being called tax cheats along the way. Canada can do better, we must do better—our economy depends on it.”— Allen S. Taylor, Chair, Family Enterprise Xchange

 

“These egregious proposed tax changes would negatively impact the family farm in ways that are both profound and complex. The federal government needs to reverse course on their ill-advised tax hike attack on our middle-class family farms. — Levi Wood, President of the Western Canadian Wheat Growers Association, grain farmer

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Letter Sent to the Cambridge Chamber of Commerce Membership

 

The federal government's recent small business tax proposal is punitive and will have damaging effects on business communities in Ontario and across the country.Over the summer, the federal Finance Department has made it clear that it intends to make the most sweeping changes to business taxes in 50 years.These proposed changes will negatively impact tens of thousands of businesses by raising taxes, reducing incentive for private investment, increasing administrative burdens, and making it even more difficult for a business to be transferred from one generation to the next.

 

Family businesses and family farms are being touted as tax cheats by the Federal Government. Although, they have walked that back - the fact is they have described legitimate and legal use of the tax laws are wrong and most commonly referred to as a loophole. This is not only ignorance of what it takes to build a successful business, but makes Canada the only country in the world to impose such punitive tax measures on small business. It is clear, this government has no respect for business, especially the locally owned family business.

 

The immediate reaction from our members and businesses across Canada was negative. We are particularly worried about the effects of the proposed tax changes for small and medium sized businesses - who are essential to our thriving local business community. We encourage local businesses to contact our  MP to provide feedback on the possible changes.

 

Bryan May, M.P., Cambridge & North Dumfries
534 Hespeler Road (Main Office)
Suite A4
Cambridge, Ontario N1R 6J7
Telephone: 519-624-7440 Fax: 519-624-3517 

Bryan.May@parl.gc.ca

 

Marwan Tabbara, M.P. Kitchener South - Hespeler
153 Country Hill Drive (Main Office)
Suite 2A
Kitchener, Ontario N2E 2G7
Telephone: 519-571-5509 Fax: 519-571-5515 

 Marwan.Tabbara@parl.gc.ca

 

 As an organization, we support reasonable attempts to reduce tax evasion or loopholes. However, these changes are insulting to businesses that have worked within the rules in good faith to build their businesses, to save for retirement, and sometimes just to keep their doors open.

 

Small Business is Too Big To Ignore and we need to demonstrate this with one voice.  

 

If you're not a small business owner but work for one, ask Mr. May and Mr. Tabbara to protect YOUR job by supporting small business entrepreneurs in Cambridge.

 

SIncerely,

 

Greg Durocher

Cambridge Chamber of Commerce

President/CEO 

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If your business is incorporated, you could be facing a larger tax bill and big compliance costs from the government’s new proposals to change the way corporations are taxed. Here are three things you need to know about the tax changes proposed by the federal government:

 

  • Do you employ family members? The government wants to scrutinize their compensation to apply a much higher tax rate on income they consider “unreasonable.”

  • Do you invest the profits from your business? The federal government is proposing to tax that income at an effective rate of 70%. 

  • Do you want to pass your business on to your children? Tough new rules make it difficult for younger kids to get the capital gains exemption. They could be double-taxed.

 

Small and medium-sized businesses (SMEs) are the engine of the Canadian economy – estimates range from 85 to 90% of all businesses in Canada are SMEs.

 

The chamber network across Canada is using its collective voice on this issue; your voice as a business person needs to be heard as part of this initiative. Send a message to your MP today. Government needs to know that this tax reform will harm businesses of all sizes.

 

Don’t know where to send the message to your Member of Parliament? Look up their address using your postal code.

 

Thirty-five business groups, including the Canadian Chamber—on behalf of the hundreds of thousands of members they represent—have presented a letter to Finance Minister Bill Morneau asking the government to take these proposals off the table and instead meet with the business community to address any shortcomings in tax policy affecting private corporations.

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These are not tweaks! The government has just proposed the most radical tax overhaul in 50 years. We’re particularly worried about the impact on business from (1) a new tax on investment income in a corporation and (2) tough new rules for compensation in family businesses. Why is the government doing this?


The Minister says it’s all about “fairness,” and his consultation document compares the tax treatment of a business owner with that of an employee to point out corporations have “unfair” advantages. But, the comparison makes no sense—there are good public policy reasons for why owners are taxed differently.


Because unlike an employee, a business owner doesn’t get a pension or health benefits or vacation pay. She invested her own money to get the business started. Or, she pledged her personal assets (house, car) as collateral for a loan. She has employees who depend on her. And, if nobody wants her goods or services next month, she does not earn a penny.


That’s why in every advanced economy in the world, businesses can accumulate and invest after-tax retained earnings so they have money to get them through an economic downturn or to make big capital investments. One owner told us, “I keep most of the earnings in the company because we’re trying to grow and because in construction, we go through tough cycles when business dries up.”


The government wants to tax “passive” (invested) income. It says it’s a crackdown on “high income individuals,” but the rules would apply to all incorporated businesses in Canada, most of whom are restaurants, retailers, farmers and consultants—to punish them for saving and investing. It gets worse!

 

Finance Canada also expects to raise $250 million by cracking down on “unreasonable” salaries paid to family members, which it says diverts corporate income into lower tax brackets. But, to pull in $250 million, CRA will have to tax over $1 billion in salaries and audit hundreds of thousands of businesses. Imagine the litigation! You’re paying your spouse $80K, but the CRA believes he or she should only be earning $50K. Do you go to Tax Court? An owner told us, “if my son had not worked 12 hours a day, my business might not have succeeded. Painting us all as cheaters is unfair and discriminatory.”


Incredibly, Finance Canada has managed to design a set of tax measures that would hit the maximum number of businesses in the most complicated way for a small amount of revenue. The expected $250 million is less than 1% of the federal deficit.


Nobody supports tax evasion or loopholes. But these changes will punish legitimate businesses. And, they come after the government cancelled reductions in the small business tax rate, tightened rules on partnerships and started taxing work in progress. That’s on top of new carbon taxes, raised CPP premiums and an increase in the EI rate. Our members are asking why this government keeps raising taxes on business.


We’re not sure what to tell them, but there is an important test ahead. Finance Canada has launched a consultation even though it is clearly determined to move forward—the legislation is already drafted. So email or call your local MP to tell him/her the government is proposing to hammer business with tax changes that will hurt families and punish
entrepreneurs. Only MPs have the power to slam the brakes on Finance Canada’s runaway train.


For more information, please contact :
Hendrik Brakel
Senior Director, Economic, Financial & Tax Policy
613.238.4000 (284) | hbrakel@chamber.ca
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Finance Canada Is Considering Major Changes to How Corporations Are Taxed

 

The Department of Finance Canada is considering major changes to how corporations are taxed. The proposed rules could have a significant impact on many Canadian businesses: potentially raising taxes, increasing the administrative burden on SMEs and heightening the impact on family-run businesses.

 

On July 18, Finance Canada launched a consultation on how “tax-planning strategies involving corporations are being used to gain unfair tax advantages.” The document contains proposed policies to close these “loopholes.” There are four key changes that will affect business:

 

  • Sprinkling income using private corporations: The government wants to tighten rules to prevent a business owner from unfairly transferring income to family members who are subject to lower personal tax rates. In certain circumstances, owners would have to demonstrate that wages and dividend payments are “reasonable.”
  • Multiplying the Capital Gains Exemption: When an individual sells a small business, the first $850,000 of capital gain is exempt from taxes. The government wants to prevent tax planning structures that enable multiple family members to use their exemptions.
  • Reducing the tax deferral advantage on portfolio investment inside a corporation: Currently, an owner can accumulate portfolio earnings inside a corporation and pay corporate income tax rates (which are generally much lower than personal rates). The owner defers paying personal income or dividend taxes until the money is taken out of the business. The government is considering alternatives that would reduce this tax advantage.
  • Converting a private corporation’s regular income into capital gains: Income is normally paid out of a private corporation in the form of salary or dividends that are taxed at the owner’s personal income tax rate. In contrast, when a business is sold, it is taxed as a capital gain, where only one-half of capital gains are included in income, resulting in a significantly lower tax rate on income that is converted from dividends to capital gains. The government wants to tighten the rules to prevent certain tax planning structures, but it is open to more favourable treatment for genuine family business transfers.

 

The Canadian Chamber of Commerce and its Taxation Committee are currently studying how the proposed changes will affect members in different industries, in family businesses and those with different ownership structures. They will be submitting recommendations to Finance Canada.

 

Should you wish to participate or provide input, please email the Cambridge Chamber at greg@cambridgechamber.com.  In particular, we are looking for detailed examples and cases of how a specific small business will be affected by the changes. We feel concrete examples will be most effective in making our case for easing the changes. We would ask that you send them to us by August 18.

 

Click here to view the consultation documents released by Finance Canada.

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